The Age of Neoliberalism at its End

Obama’s budget stands in opposition to thirty years of failed subsidies to the private sector

Though President Obama’s first budget proposal, whose rough outlines were released yesterday, doesn’t say much about his transportation proposals, it does provide insight into our country’s new direction overall.

America’s fundamental problem is that it has allowed income inequality to increase rapidly over the past four decades, especially as compared to that in other developed nations. Because of our generous corporate tax breaks, lack of national health care, and inferior education system, we have simply made the problem worse, exasperating the plight of the poor and encouraging the rich to continue enriching themselves – but not the economy as a whole.

Since World War II, the world’s developed economies have provided increasing standards of living to their inhabitants, but at a slowly mounting cost. Pressure by private interests in recent decades has sacrificed many of those gains by destroying social protections at the alter of “free” trade; the result was a reduction in the power of democracies to govern as corporate multinationals, working under the auspices of organizations such as the WTO, have created markets that prioritize the profit-making of a few above the promotion of a quality of life for all. In the name of economic freedom, the liberty of the majority has been reduced.

The Bush administration marked the high point of this neoliberal philosophy by encouraging government to subcontract every aspect of its operations to the private sphere, at higher costs and at reduced dividends. The disaster represented by Hurricane Katrina, which Bobby Jindal claimed showed that “the strength of America is not found in our government,” rather was a demonstration that a government that doesn’t believe in government doesn’t work. The death of thousands of people in New Orleans was the result of a government not willing to take account for its responsibilities, which are fundamentally to provide for the public welfare. That mission has been diluted and sometimes lost since the rise of modern conservatism.

States and cities, quickly loosing the support of the federal government, often have had no choice but to sell off public assets – or let them rot. In transportation, the result was clear: Washington wanted much of the interstate highway system auctioned off to the highest bidder; it wanted a public Amtrak to fail; it was willing to let transit systems fall into disrepair; and it saw no reason to encourage sustainable transportation if it wasn’t profitable.

Mr. Obama’s budget promises a new day in the United States, a return to the hope that as a collective, we can ensure the health and well-being of all individuals. It turns its back on the premise that the market forever decides what is right or what is wrong. It encourages us as a people to ask what we can do for one another, rather than what we can do for our own self-interests.

This year, Congress will debate and eventually approve the new transportation bill. Lawmakers can choose to continue to deny the fact that automobiles and their product – sprawl – are the principal causes of the environmental disaster that lies ahead of us. They can continue to ignore the rapid deterioration of our infrastructure, sell it to private industrialists, and allow it to continue falling apart.

Or, our congresspeople can do something new, pushing for sustainable, environmentally-friendly mobility that encourages the kind of dense living that has been proven time and time again to be better for the health of the world’s ecosystems. Congress can choose to advance a massive reconstruction of our railways and roads and bridges that will secure our standing in the twenty-first century. It can choose to work on behalf of everyone, rather than just the wealthy few.

I hope that this week marks a turning point in American society, a recognition that somewhere, we went off course. Mr. Obama’s budget proposal represents a strong starting point. Now the rest of us need to get to work.

It’s amazing how the open philosophy of low or non-existent taxes has been so prevalent since 1980 and that the lack of proper infrastructure spending and maintenance has been done (or not done) in a hidden way for so long. Every now realizes how bad our infrastructure is and wants to know why. Well, the period of every person for themselves and you don’t need to pay a fair amount of taxes is over…or at least it should be ending, it is out of absolute necessity.

America’s fundamental problem is that it has allowed income inequality to increase rapidly over the past four decades, especially as compared to that in other developed nations.

That’s not true. America’s fundamental problem is that it has always been substantially more unequal than other developed nations. The US Gini index bottomed in 1968, at 0.39; it has since risen to 0.47. Of the eight points the US Gini has gained, two come from a methodological adjustment in 1992. To put things in perspective, post-Thatcher Britain is at 0.36. Compare this to Norway, which went up from 0.29 in 1990 to 0.37 in 2002.

A lot of liberals in the US, especially Paul Krugman, have convinced people that the US used to be a fairly equal nation. It never was. It’s hard to find any developed country with a Gini of even 0.39. Norway has probably reached it by now, and Singapore and Hong Kong are both in the high 40s or low 50s, but that’s about it. Israel’s Gini is 0.37-0.39, depending on who you ask, and it’s considered a national crisis; the only reason it doesn’t get addressed is that Israeli elections are primarily about security, and the person who has the most credibility on it right now, Netanyahu, also happens to be a Reaganite.

Kyle: another myth is that the US has low tax rates. It does, but not on the rich. In New York City, top income taxes on the rich are higher than in France and Britain, which have no state taxes. The difference is mainly that the US income tax system is far more gradual, so that effective tax rates on the middle and upper middle classes are low by international standards, even as effective tax rates on the super-rich are normal.

That was what I was actually referring to (middle class tax rates), I should have clarified. I know no one likes seeing the money taken out of the paycheck for taxes, but it’s a necessity. I think one of the major problems, is the cost of living is so high (especially in places like Boston) here in the U.S. overall. If they really raised my taxes here, I would definitely have a problem getting by, especially considering rental costs. To take the opposite end of the spectrum, taxes are higher in Austria, but rents are much cheaper. I had a great apartment in a nice area of Vienna for $600/month, in Boston I pay $600 and have three roommates.

Taxes are very high in Sweden and so is the cost of living, in some aspects, but the government services that are provided are very, very good.

I guess what I’m saying, is that it depends on where you live. But what we’ve been doing (taxes that are too low and what we already pay, not being used properly; keeping up our infrastructure) can no longer occur.

Well, the more tax-resistant parts of the US have lower cost of living. Boston, New York, and San Francisco have stratospheric rents; it’s Texas where you can get great apartments in nice areas for $600/month. There is more to that – for instance, transportation costs are lower in New York than in places where you need a car – but generally, there’s a positive correlation in the US between cost of living and liberal attitudes toward taxes.

I’d also challenge your assertion that Europe is cheaper. I think Vienna is fairly cheap for Europe. But London has higher rents than New York, and Paris is quite expensive as well. For what it’s worth, living costs are lower in the US in the sense that a Euro buys less in Europe than its worth in dollars buys in the US.

Take this with a grain of salt, as it’s purely anecdotal experience. But living in Hong Kong and periodically returning home to NYC I am always struck by the middle-class feel for American life. Here it’s a very stark contrast between the rich and the paupers. Loads of luxury cars vs old broken down buildings and wet markets. Same holds true for London; I would be interested in seeing the Gini coefficient broken out by city. You spend any amount of time near Canary Wharf and it just gets you down (until, of course, you travel to Elephant & Castle, Dalston, etc).

In my view this isn’t an infrastructure issue. Something is wrong with a country that’s willing to let urban communities fall into total disrepair – with poor schools, abysmal infrastructure, terrible policing, etc.

More to the point Obama’s focus on infrastructure and transportation is more about national survival and growth than about returning to an era of profligate spending. Reagan had a reasonable viewpoint about shrinking the budget of federal government in the early 80s. But similar to Ike in the 50s much of his vision is about tangible, real-world shifts in how the country structures itself for the future (compare what he’s doing to the space race and the interstate system). Much of the “Great Society II” criticism, in that light, seems a bit off.